Business Process Outsourcing:

A survival tool for logistics companies in

uncertain times
Today's economic climate is clearly causing
gloom, doom, fear and often panic for the logistics
industry. A host of factors - the credit crunch,
unprecedented economic volatility, deteriorating
consumer confidence, yo-yoing fuel costs,
increased governmental regulations, declining
revenues, severe earnings and cash flow
pressures, loss of pricing power and excess
capacity - together are significantly impacting the
industry's bottom line.
Business process outsourcing (BPO) represents a
strategic and efficient life raft for companies
striving to stay afloat in these tumultuous times.
If implemented appropriately, BPO can be a fast
and simple solution to rapidly reduce costs, help
companies survive the economic downturn and set
the stage for future growth and expansion after
the economic tsunami subsides.

Need evidence of how bleak the state of the

logistics industry really is? The following are just
a few examples which indicate how treacherous
the waters are
Hapag-Lloyd,
n the German container shipping
line, swung to a loss of $302 million in the first
quarter of 2009 from a $24.5 million profit a
year ago on double digit declines in cargo
volumes and freight rates. (Source: Journal of
Commerce)

UPS'
n 1Q09 results showed revenue was off
13.7 percent at $10.9 billion. The continuing
deterioration in global economic activity
resulted in decreased revenue and profitability
in all business segments. (Source: UPS investor
Why BPO for logistics companies?
relations website)
Rapid cost reduction is mandatory for companies
Freight
n traffic on U.S. railroads was down trying to survive the most challenging economic
sharply during April 2009, carload traffic fell by climate in over 60 years. And while they have
23 percent, and intermodal car traffic dropped been laggards in BPO uptake, logistics companies
by 17.9 percent, as compared to April 2008.
can gain significant cost savings value by
Combined cumulative volume for the first
leveraging BPO. For example, approximately
17 weeks of 2009 on 12 reporting U.S. and
Canadian railroads was 5,573,088 carloads, 60 percent of a logistics company's operating
down to 19.0 percent (1,308,561 carloads) costs are attributable to customer service.
from last year. (Source: Association of American Of this, roughly 60 percent is back-office
Railroads) document processing or phone-based customer
contact. Outsourcing these processes to a logistics
Year-over-year
n tonnage freight is expected industry-savvy service provider can deliver cost
to bottom at - 10.3 percent in 2Q09 savings of 40 - 50 percent
before beginning a slow rise to a still stressful
of - 6.6 percent in 4Q09. For truckers, this
promises steadily increasing pressure on rates
into the summer months. (Source: FTR
Associates)

BPO to the rescue

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Process In-house, onshore cost range
Bills of lading processing $5.00 - $8.00 per each
Airway bill manifesting $0.30 - $0.40 per each
Accounts payable $0.90 - $1.33 per each
(Source: WNS)
But BPO delivers benefits which extend far
beyond cost savings, including moving costs from
fixed to variable, maintaining focus on the
customer and retaining them in the face of
operating cost reductions, placing focus on
knowledge rather than intuition to increase
revenue, consolidating delivery operations to
standardize business processes, getting even more
out of shared services costs and delivering
continuous improvement. Logistics companies
which have included BPO in their corporate
strategy are better poised to weather this
economic storm which threatens to sweep even
the most established players away.
Clearing the decks for success -
Seven simple rules for logistics
companies
1. Ensure BPO is a CEO priority
In uncertain times, sponsorship for critical
initiatives such as BPO must come from the very
top. Only the CEO can deliver the message that
there are no other options for survival. Otherwise,
the imperative for outsourcing is not taken very
seriously, and management sees implementation
as optional, easily finding ways to opt out, with
arguments ranging from "outsourcing never
works, we've tried it," to "the process is too
critical to outsource" to "I have to implement
new systems first". As many logistics companies
with a history of private ownership try to stay
afloat in the current environment and attempt to
reinvent themselves to stay ahead of the
competition, there is clearly no time to lose or
room for 'management by consensus'. This is a
decision for the CEO and no half measures will
work. BPO succeeds for logistics companies
when there is clear visibility of the CEO behind
the wheel.
Business Process Outsourcing:
A survival tool for logistics companies in uncertain times
Offshore BPO cost range
$2.00 - $4.00 per each
$0.10 - $0.20 per each
$0.52 - $0.83 per each
2. Approach outsourcing with an open mind
The BPO industry has moved well beyond
delivery of volume-based voice and data work
into highly complex industry and insight
processes - think freight audit, tariff filing and
maintenance, claims management, billing,
exceptions management and marketing
analytics. Therefore, smart companies
collaborate with providers to determine 'the art
of the possible.' They start the outsourcing
discussion by saying, "This is where we need to
get to, so how do we get there?". In the
logistics industry, there are
a number of companies that are improving
their operating ratios by moving processes
offshore, either to captive operations or to
third-party providers. Ocean carriers including
Maersk, APL, Hapag-Lloyd, NYK, MOL and
CSAV initially pioneered the move offshore, by
setting up delivery centers in India and other
lower cost countries such as Malaysia and
China. And third-party logistics companies
such as FedEx, Exel, Penske, Ryder, Yellow
and Bax Global are taking the next step by
outsourcing to external BPO providers.
Processes delivered offshore include not only
rules-based work such as export
documentation, and time sensitive shipment
updates and tracking, but also more complex
finance processes such as accounts receivable
and consolidation of books. A typical business
case for logistics companies delivers annual
savings in the range of $1 million per 50 FTEs
when a documentation process is moved to an
offshore BPO provider, with a payback period
for the initial investment, necessary for
knowledge transfer and transition, of less than
9 to 12 months.
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3. Keep it simple
Speed to cost reduction with no diminution of
quality should be the first and foremost
objective of BPO as a survival tool. This is not
the time to radically transform business
processes, implement new enterprise
technology, put in the latest bells and whistles
or conduct a wholesale overhaul of the logistics
industry business model. Keeping it simple
means being realistic about the aspirations for
the program in times of economic uncertainty,
and focusing only on obtaining the benefits
that truly matter now. Thus, logistics
companies should strongly consider
outsourcing their simplest, most repetitive
documentation processes such as bill of lading
and freight cargo receipt processing, billing,
airway bill manifesting, driver logs entry, and
freight bill capture and audit on an 'as is'
basis. A BPO service provider with expertise in
these areas can deliver cost savings for their
clients in as little as 90 days.
Rapidly reducing the cost structure for
a European NVOCC
A leading European Non-Vessel Operating
Common Carrier (NVOCC) looked to reduce
its mounting staff costs in Europe, Latin
America and Asia. WNS' deep logistics
industry knowledge contributed to a
solution which standardized and migrated
the NVOCC's entire import bill of lading
and import manifest preparation processes
among all its locations to one of WNS'
offshore delivery centers, resulting in a
50 percent cost reduction. Further, the
standardized processing environment
created for them has dramatically improved
information dissemination among its
network of offices. The NVOCC is now
experiencing minimal rework when moving
shipments around the globe, and negligible
to no customs delays or fines.
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4. Move fast
Companies can quickly put in place
outsourcing programs by mandating that
aggressive timelines are a must. Truth is, there
is no change without urgency. If moving
quickly to implement BPO is not seen as vital
to the basic survival of the company, it will not
produce the desired results. But imposing
deadlines for the development and
implementation of a roadmap including scope,
provider selection and transition will mobilize
the organization. For example, when a multi-
billion dollar North American shipping
company decided to move its export
documentation process in Europe and the U.S.
to India, the CEO set an internal deadline of
reducing onshore headcount by December 31st
of that year to ensure that lower operating
costs kicked in as of the start of the new fiscal
year. Establishing clear deadlines, especially
when mandated by the CEO, gets the entire
organization focused and moving quickly to
reap the benefits.
5. Develop a realistic deployment plan
Even when outsourcing is being implemented
for cost savings, many companies push for or
buy into an unrealistic transition roadmap in
their haste to cut out more cost. And when the
first failure occurs because processes cannot
be thoroughly documented, the network is not
ready or work shadowing is insufficient, the
naysayers come out in force. A deployment
strategy that builds up steam over time after
the success of initial phases is far more likely
to meet objectives. For example, due to the
geographically dispersed nature of the logistics
industry, a key initial consideration is which
operating regions are better suited to
consolidation via outsourcing benefits than
others. In many cases, if in-house shared
services centers (SSC) already exist,
developing an offshoring plan through the SSC
may be the logical place to begin, with other
regions following suit in a phased approach.

Moving from fixed to variable costs for
a global express and logistics company
A global Top 3 express and logistics
company had to decrease the expenses
associated with its mission-critical airway
bill manifesting process. With specialist
operations centers serving the logistics
industry, WNS was able to establish a
350-person operation for the company in
less than 90 days, and is handling an
annual volume of over 9 million airway
bills. WNS not only reduced airway bill
manifesting expenses by 60 percent,
but significantly increased the accuracy of
data input to 99+ percent. As the delivery
is priced on a unit transaction basis, the
client gained the benefit of variable cost
pricing, with WNS assuming the
volume risk.
6. Insist on alignment and industry knowledge
Partnering with a BPO provider who
understands you are the client, and will align
with your ways of working - rather than impose
its own - is vital in good times and bad.
Alignment refers to understanding the client's
values and accordingly adjusting its working
style, designing its deliverables to support the
client's needs and having the flexibility to meet
ever changing business needs in this economic
climate. Equally important is deep industry
knowledge. If a provider isn't highly
experienced in processing bills of lading,
freight bills, driver logs and commodity
classification, and is unfamiliar with the
underlying rules of freight, duties and taxes in
different operating regions, entrusting delivery
of those processes to that third-party can
quickly 'sink a ship.'
7. Debit budgets in advance
This little trick obtains commitment where it
counts - in the budget process. Building BPO
savings into the current year's budget in
advance ensures managers have no excuse but
to be committed to the implementation of the
BPO program or find some other way to get the
Business Process Outsourcing:
A survival tool for logistics companies in uncertain times
cost out fast. Truth be told, short of cutting
staff to the bone, there is rarely another way.
This is particularly true in cost center functions
such as documentation, freight audit, driver
logs, claims and finance and accounting.
A BPO provider with logistics domain expertise
knows the extent of cost savings attainable for
outsourced processes, and can work with the
client to craft a scope of services specifically
designed to achieve budget goals.
Advantages logistics companies gain by
moving to a BPO model
Rapidly reduce cost by sourcing processes
with scale
With industry-wide declines in operating margins
in 2008 of between 10 to 40 percent and
pessimistic outlooks for 2009 where flat growth
will be considered "success", the need to reduce
the cost base to align with volume and revenue
projections has never been more urgent.
For example, document processing as part of the
value chain accounts for 35 to 50 percent of total
personnel costs in the logistics industry.
This people - time - and money-consuming
process can easily be selected as the first
candidate for outsourcing to a third-party with the
scale to deliver these processes at a significant
cost savings, leading to a more expansive BPO
program to further decrease operating costs.
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Standardize business processes
Consolidating business processes offshore in an
effort to reduce cost has a positive by-product -
levels of standardization that are difficult to
achieve through incremental efforts such as
process reengineering when times are easier.
With standardization, organizations are well-
positioned to take the next step to transform
processes through technology and quality, which
takes them to the next level of efficiency.
For example, a leading NVOCC successfully
standardized its import manifest process across
13 countries by moving it to an offshore BPO
provider. By standardizing how every single field is
captured with the exception of specific regulatory
or critical local requirements the company now
has a more robust MIS capability and a uniform
process across its operating regions, performed
with fewer resources at lower cost.
Rationalize the delivery model
The greatest challenge in moving to a shared
services, or horizontal structure is overcoming
misconceptions and fears about diminution of
service levels, risk and performance.
By wrenching processes out of the business lines
in the name of corporate survival, the objections
which delay or derail consolidation and
centralization are, in effect, overcome. In an
outsourced environment, the scale, expertise,
flexibility and cost savings quickly become
evident. BPO providers can readily and rapidly tap
offshore talent pools to deliver business processes
at a significantly reduced cost. Moreover, given
enhanced and redundant communications and
connectivity infrastructures, shipping documents
can just as easily and transparently be processed
in Mumbai, Mexico City or Manila. For example,
with 24x7 availability of skilled staff, BPO has
emerged as one of the only strategies with which
logistics companies are able to ensure a turn
around time of less than one hour for bills of
lading and airway bills with nearly 100 percent
accuracy. In fact, some processes such as freight
audit or duplicate payments analysis cannot be
delivered cost-effectively without tapping into
BPO's lower cost base.
5
Commercialize the approach to operations
Most companies cannot put a price on the cost of
processing a bill of lading, driver log or airway bill,
collecting a receivable or interacting with a
customer. Imposing the discipline of a BPO
contract replete with unit cost, turn around times
and customer satisfaction levels makes the
organization think differently about consumption
and service levels, making the actual cost to sell a
product or service transparent. By partnering with
a knowledgeable BPO provider and implementing
a transaction-based pricing model, logistics
companies can typically reduce their transaction
processing expenses by as much as
30 to 50 percent. Specifically, the in-house cost
of processing a bill of lading can run
$5.00 - $8.00, while offshoring can reduce the
expense to $2.00 - $4.00. And processing an
airway bill can cost a logistics company between
$0.30 - $0.40, but an offshorer can deliver at a
cost in the range of $0.10 - $0.20.
Delivering continuous improvement for
a Fortune 500 logistics company
After reaching steady state, the U.S.-based
shared services operations of a Fortune
500 logistics company hit a plateau in its
ability to optimize its cost structure.
By engineering a rapid transition to
offshore delivery, and seeding the offshore
operations team with industry and
functional experts, WNS was able to attain
an additional 40 percent cost savings for
the company. And by applying Six Sigma
and Lean principles to the client's
processes, productivity gains of 10 percent
were achieved within the first three years of
the engagement. Pleased with the results
of this partnership, the client is now
tracking business outcomes, as opposed to
transactional metrics, delivered by WNS,
and is poised to weather this economic
storm in relation to its competitors.
 Business Process Outsourcing:
A survival tool for logistics companies in uncertain times

Which logistics processes are ripe for business process outsourcing?

A wide range of transactional and highly complex logistics processes can successfully be outsourced to a
third-party service provider with deep, proven logistics industry domain expertise.

Sales/marketing Operations Finance

Tariff
n updates Import/export
n manifest Accounts
n payable
Marketing
n collateral PO entry
n AR/credit
n and collections
Campaign
n management Drivers
n logs Disbursement
n accounting
Rate
n quotes Fuel
n tickets Agent
n reconciliations
Sales
n reports EDI gateway
n exception General
n ledger
management Bank
n reconciliations
Customer service Tracking
n status updates Management
n reporting
Service/rate
n inquiries Vendor
n performance reports
Customer
n advisory Operations
n planning Origin/destination agent
Pre-advice/arrival
n notification Cargo
n de-stuffing Export
n manifest
Cargo
n tracking Customs
n clearance Collect
n charges
Web
n help Vessel
n performance Invoicing
n

Cargo
n claims Vendor
n contracts Import
n manifest
Complaints
n Import
n charges
Bookings
n

Documentation
BL/AWB/FCR
n processing
Billing
n and invoicing
Freight
n audit
Tariff/contract
n filing
Data
n transmission
Compliance
n checks
Landed
n cost

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Suite 2515 Harmondsworth Lane Godrej & Boyce Complex
New York, NY 10170 West Drayton, Middlesex Pirojshanagar
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Mumbai 400 079

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Copyright © 2009 WNS Global Services

About WNS
WNS is a leading global business process outsourcing
company. Deep industry and business process
knowledge, a partnership approach, comprehensive
service offering and a proven track record enables
WNS to deliver business value to some of the leading
companies in the world. WNS is passionate about
building a market-leading company valued by our
clients, employees, business partners, investors and
communities.

To learn more, please write to us at info@wnsgs.com

or visit wns.com